A mobile virtual network operator (MVNO) is a company that provides mobile phone service but does not have its own licensed frequency allocation of radio spectrum, nor does it necessarily have the entire infrastructure required to provide mobile telephone service. As per the MVNO directory 2009, there are 366 active MVNOs and there are another 89 potential MVNOs. The concept of MVNOs was coined by Sir Richard Branson of Virgin Mobile in UK in 1999 and Virgin is still the largest MVNO with over 4 million subscribers in UK. There are currently over 50 MVNOs in US and Netherlands. However in almost every country, the share of subscriber base with MVNO is less than 10% 

There are various forms of MVNOs depending on the value chain activities they cover. The figure below provides an overview of the various activities performed by different entities: 

Image Copyright with Telecom Circle

 The fourth entity depicted as MVNO in the above diagram is essentially the “Thick MVNO” and is the most prevalent form of MVNO.  Key examples of Thick MVNO are Virgin, Lebara, Helio and while that of Mobile Virtual Network Enabler (MVNE) are Ztar, TMNG, Convergys and ASPIDER Solutions. 

What does MVNO offer?

MVNOs normally try to leverage on one of the three strategic assets – Brand, Distribution or Existing Customer Base. The existing customer base can be non-mobile customer base that can be cross-leveraged for mobile services. There are MVNOs that try to offer better services for their customers, e.g.  Rabo Bank launched its own MVNO to serve its banking customers better. Communities of interest can come together to form a community MVNO, e.g. fans of Manchester United or McLaren can potentially brand an MVNO to display their sporting affinity. Wal Mart can use its distribution reach and loyal customer base to venture into the MVNO space.

The key strategic asset that MVNO brings to the table also defines its positioning in the market place. The broad classification of MVNOs is as follows

Business MVNOs focus on catering to the mobile services needs of business houses, e.g. Abica in UK offers cost savings on business mobile, landline and broadband services

Discount MVNOs provide cheaper services to their customers and price is their key differentiation

Niche MVNOs focus on a specific niche of the market and charge a premium for the brand

Ad Funded MVNOs have a business model that is based on advertisements and offer to provide free mobile services to their customers return for viewership of the advertisements, e.g. Blyk in UK

Ethnic MVNOs targets ethnic communities or other communities of interest by offering significant value to their customers, e.g. Lebara in UK offers reduced tariffs to its ethnic customers for calling their home countries

Convergence MVNOs are set of MVNOs that leverage on convergence, e.g. BT Mobile in UK and Italy. BT Mobile encompasses not only GSM but all wireless telecoms technologies and leads the field in Fixed-Mobile convergence­

Why do carriers (MNOs) find MVNOs attractive?

Operators look at MVNOs as an outsourcing partners to either reduce cost or increase productivity by reaching out to more customers profitably. No market is homogenous and consists of various segments which may not be equal in size. Operators may find it difficult to profitably target all the segments. MVNOs are a medium to implement a more specific marketing mix to suit the needs of the niche segments. MVNOs also help carriers reduce their costs as they take away a significant portion of operator costs like customer service delivery, billing, marketing, etc. MVNOs are able to offer these services at a lower cost by leveraging on their current assets. MVNOs may also help increase the revenues by way of reduced churn and increased ARPU.

Operators are particularly interested in MVNOs to better utilize their excess capacity. They can off load their excess capacity at marginal costing (at a discount to the normal tariffs) and can thus offer discounts to specific segments without having to offer it to its entire base.

Future of MVNOs

Despite the benefits that MVNOs can bring, the current share of subscribers in most of the markets they operate in is less than 10%. I am not sure if any MVNO is really making enough money to cover its expenses. The reason for this is that there is now a new entity in the form of MVNO that is trying to gain a pie of the value chain without increasing the value of the chain. This means that the margin needs to come from the carriers or through operating efficiencies. There is not enough inefficiency in the operator domain and hence the high margin opportunities are limited. The carriers are already under margin pressure and have a threat of getting marginalized and hence feel squeezed with the arrival of MVNOs.

An MVNO is only as strong as its ability to differentiate its services. An MVNO can differentiate itself through niche segments, its distribution depth and loyal customer base.

According to Whitey Bluestein, widely recognized as the creator of the first MVNO when he developed a virtual network operation for pre-WorldCom MCI in the mid 1990s,

There are three key areas that most new entrants simply have not thought out either tactically or strategically: distribution, customer churn and industry technology.

In many cases, the MVNOs do not have a clear technology roadmap and hence are not able to transition from 2G to 3G to 4G. Being asset light (read headcount), most of MVNOs have a limited ability to forecast future trends, pace of technology changes and hence miss out on opportunities. They have limited access to latest handsets in the operator driven markets unless they tie-up with the operators themselves for the handset deals.

Also Read: The future of Data Only MVNOs

Read other similar articles on www.telecomcircle.com

Views expressed by Authors/Users/Subscribers etc on this website are completely their personal views and in no way reflect the views of their employers or any connected parties. Please view our detailed Terms & Conditions.

Aspiring Consultants can seek free & valuable advise by Clicking Here

Related Posts

• August 21, 2009 -- Does 3G have a Viable Business case for Emerging Markets? (1)
• March 8, 2009 -- Wireless Industry Business Models (0)
• September 4, 2008 -- Pokeball Goes Google (0)

An another fabulous invention from Google!!! The New Google Chrome is not just a browser; it is THE Browser meeting pretty much all expectations.

Download and install was very easy. A light 7 MB download file made things smooth. On install, Chrome directly imported all my favourites, history passwords and tabs from IE 8. All I had to do was click, and I was into the new world of Google Chrome.

On the first run, you would notice the ultra light behavior of this browser, somewhat similar to Picasa and Google Talk. It’s so much so like a file click. When first running Chrome, it asked me if I wanted to keep the default search provider as Google, to which I had an option right there to change to something else.

The home page is basically a history of your most popular pages you visit as well as new bookmarks and searches, etc. The address bar is clean. It also works as a search engine, minimizing efforts to navigate to the Google search page. Flash works great, Gmail attachments work as normal.

Some of the features are really great. When hovering over a link, the browser displays the complete URL for that link in the lower left corner above the site content instead of having status bar.

Right click just above the address bar and you can reach the Task Manager. This is one cool thing which caught my attention. The Task Manager gives a complete reading of the number of tabs open and CPU, Network and Memory usage under each tab. Now who had thought about that? Go deeper into “Stats for Nerds” and you are shown even more details.

Well, there is a lot more to write. Why not leave the rest to my readers? Go ahead and explore the all new Chrome.

Views expressed by Authors/Users/Subscribers etc on this website are completely their personal views and in no way reflect the views of their employers or any connected parties. Please view our detailed Terms & Conditions.

Aspiring Consultants can seek free & valuable advise by Clicking Here

Related Posts

• May 21, 2009 -- MVNO Demystified (0)